What You Should Know Before Personally Guaranteeing a Contract

When signing a contract, it is important to understand the implications of personally guaranteeing that agreement. Personal guarantees are a common feature in contracts, however, they can also be extremely risky for individuals if the agreement is not fulfilled. Here, we will explain what personal guarantees are and why they should be taken seriously. 

What is a Personal Guarantee? 

A personal guarantee is a contractual promise made by an individual or business owner to pay back any debt that may result from the agreement. This means that if the party you have contracted with does not fulfill their end of the bargain and defaults on their loan, you would be responsible for paying off the debt. In other words, your personal assets would be at risk if you sign a contract with a personal guarantee. 

Consequences of Failing to Fulfill Your Guarantee 

If you fail to fulfill your obligations under a personal guarantee, then you could potentially face serious legal consequences such as having your assets seized or even being sued by the other party for breach of contract. Additionally, your credit score could suffer and creditors may view you as untrustworthy or irresponsible in the future. 

When Signing Contracts With Personal Guarantees 

Given how risky it can be to sign contracts with personal guarantees, it's important to make sure that you fully understand what you're agreeing to before signing on the dotted line. Make sure that all terms and conditions are clearly outlined in writing so there's no room for misunderstandings later down the line. Additionally, try to negotiate for better terms where possible – such as limiting your liability – so that your own finances are protected in case of default on either side. 

Personal guarantees can be beneficial in some cases but can also come with significant risks if not managed properly. Therefore, it is essential to understand exactly what you're getting into before signing any contracts with this type of provision included. By doing so, you can protect yourself from potential financial losses and ensure that both parties fulfill their obligations without issue. If necessary, consider speaking with an attorney who specializes in contract law before entering into any agreements so they can advise on any potential risks associated with signing personally guaranteed contracts.